PC and the Bureaucratization of the Economy

The recent incident at a Philadelphia Starbucks in which police arrested two black men who were waiting for a friend to join them has stirred a lot of controversy and brought bad publicity to the coffee chain. Facing demonstrations accusing the company of racism, the Starbucks management even closed some of its stores for one day in May so that employees can undergo training to deal with racial biases.

That American firms find themselves immersed in the intense political struggles no longer seems surprising. Google fired engineer James Darmore after he wrote a memo that questioned the company’s “diversity” policies, and Mozilla forced out CEO Brendan Eich because he had contributed money to an organization that opposed legalization of gay marriage. The New Yorker recently attacked the fast-food restaurant chain Chick-fil-A for even existing in New York City and for openly having Christian principles in the company’s organizational structure. Mayor Bill de Blasio demanded a boycott of the restaurant when it opened in New York; New Yorkers apparently failed to heed his demands and are buying a lot of chicken sandwiches, instead.

In the movie, “ Dr. Zhivago,” the revolutionary Strelnikov tells Zhivago: “The personal life is dead in Russia; history has killed it.” The only thing left, of course, is the political life. I saw a recent flyer publicizing a women’s study program at a university declare: “Feminism is about connecting the personal with the political,” and wondered if the writer someday would be as enthusiastic about killing political opponents as was the fictional Strelnikov.

These are the undeniable recent political developments in the USA, but what do they mean for a market economy or, to be more specific, an economy that is based upon relatively free prices, property rights, and entrepreneurship? The answers to such questions is simple: As long as promoters of political correctness seek to use the state to coerce others to accept PC viewpoints, the growth of PC in the workplace will be economically harmful and impose unnecessary costs upon producers and consumers.

First, and most important, we are not dealing with simple preferences. As pointed out, many people on the left refuse to patronize Chick-fil-A because the company’s leadership does not believe that gay marriage is compatible with Biblical principles. Furthermore, the company has contributed money to organizations that oppose gay marriage, which has enraged certain political factions, and especially some Democratic Party politicians.

The city government of Chicago, for example, in the past refused to permit Chick-fil-A to open a franchise in the Chicago city limits because of the company president’s stated beliefs. (The city has three locations today.) Chicago Mayor Rahm Emmanuel justified the action by claiming that the business did not conform to “our values”:

Chick-fil-A values are not Chicago values. They disrespect our fellow neighbors and residents. This would be a bad investment, since it would be empty.

Chicago Alderman Joe Moreno, who was behind the blocking of Chick-fil-A opening a store in his ward, added:

They (Chick-fil-A) should be in the business of selling chicken, not promoting a political philosophy. If they want to come out with an anti-discrimination policy, put it in their employee handbook, post it in their restaurants…then we can have a discussion.

These are curious remarks, given that Moreno and Emmanuel are demanding not only that Chick-fil-A have a political philosophy, but one that agrees with the worldview of the Chicago politicians and those political groups with which they are aligned. Furthermore, the demands that businesses promote certain political viewpoints – or not be permitted to exist – have far-reaching consequences and have only a social downside.

Given that “diversity officers” exist to promote a particular political philosophy, they are more accurately labeled “political officers,” and anyone familiar with the organizational structure of various Red Army factions in the former U.S.S.R. and other communist countries understands the actual role of the political officer. Those officers had one duty, and that was to enforce political conformity and to root out possible dissenters, and it does not stretch credulity to say that the gaggle of diversity officers burrowed into American businesses, colleges and universities do not have similar roles.

For every James Damore, there are many employees at U.S. firms that simply are silent about their political views, religious beliefs, or pro-life views on abortion. It is not worth the risk to them to test the bounds of tolerance in their workplaces.

In that regard, profit-oriented business organizations that hire political officers and demand political conformity in the workplace are mimicking government agencies, and it is here that we turn to Bureaucracy by Ludwig von Mises for guidance. Mises noted that a business cannot be run by bureaucratic management and simultaneously be successful in satisfying consumer demands and being profitable (at least in a market system). He writes:

…the manager is not a business executive but a bureaucrat, that is, an officer bound to abide by various instructions. The criterion of good management is not the approval of the customers resulting in an excess of revenue over costs but the strict obedience to a set of bureaucratic rules. The supreme rule of management is subservience to such rules.

Mises continues:

Every kind of government meddling with the business of private enterprise results in the same disastrous consequences. It paralyzes initiative and breeds bureaucratism.

While many of the firms in question have claimed that a “diverse” workforce also is more effective than one not diverse, one wonders why the “diversity” numbers have not reflected what the companies claim to be obvious. The people who own and run Google seem to seek factors of production that will satisfy their customers and provide profitability to the company. One cannot imagine the CEO claiming that it was hiring an officer to oversee diversity of hardware. Indeed, if hiring managers have been bringing in its “undiverse” workers simply to satisfy their own desires of making sure their hires “look like them,” then they have done their employer a disservice.

To put it another way, when these firms hire diversity officers, they are not doing so because they believe that since their inception they have been employing inferior workers, but rather because they wish to impose political directives upon their employees, directives that are in line with their own current political philosophy. However, once these companies go this route – basing production decisions upon political viewpoints – they chose to apply the bureaucratic model rather than one that is entrepreneurial.

At the present time, firms like Apple or Google are so successful and so productive that one cannot imagine their demise, and especially their demise as being self-imposed. Less than two generations ago, people were saying the same thing about General Motors and IBM. General Motors collapsed because it could not sustain its private employee welfare state model and IBM bet the house on mainframe computers. The larger point here is once companies abandon or limit their entrepreneurial focus and seek political or some other kind of conformity, they succumb to the sclerosis of bureaucracy.

Likewise, if firms like Chick-fil-A are denied the right even to exist because an executive with the firm disagrees with politicians about the Sexual Revolution, or if people are denied opportunities to work because their political views do not conform to the views of people in power, the result is lost economic opportunities, or what economists might call deadweight losses. These are real costs borne by real people, costs for which there is no economic return.

In the former U.S.S.R. and other communist countries, one’s political status has been one of the main determiners of someone’s employment and standard of living. One cannot argue that such a state of affairs made life better for consumers and workers in these states and one certainly cannot argue that imposition of such political directives will do anything but harm our own economy.

William L. Anderson is a professor of economics at Frostburg State University in Frostburg, Maryland.